Minnesota County Hopes Federal Money, Google Will Fund Muni Broadband Plan

Published June 9, 2010

Lake County, Minnesota, is hoping for a federal grant to fund its proposed $70 million municipal broadband service—and, lacking that, will hope Google or municipal bonds will get the long-delayed project underway.

Gary Fields, CFO of Minneapolis-based National Public Broadband, a firm that facilitates municipal broadband services across the country, said in May the chances Lake County will see its project come together without local funding are uncertain.

“We don’t know what our chances are,” Fields said, referring to the county getting a grant to build a fiber network funded by the Rural Utilities Service. Fields says he expects to hear back by early August.

Searching for Funds
As a stop-gap, the county has petitioned Google, the Mountain View, California Web search giant, to build a fiber network—as it has promised to do in a very select number of “underserved” communities throughout the country. Fields has said this is a “longshot.”

Another option, one that could leave taxpayers on the hook, is municipal financing through revenue bonds. Many attempts by municipalities to provide broadband as a public utility have resulted in failure. The muni broadband system in Burlington, Vermont, for instance, is $50 million in debt.

Heed History’s Warning
Scott Testa, professor of business administration at Cabrini College in Philadelphia, says municipalities like Lake County, Minnesota, should rethink the idea of using taxpayers’ money to get into the broadband business.

“The idea is that these projects are supposed to promote economic growth, but municipalities have not done a very good job from a profitability standpoint,” Testa said. “When it comes to a bond issue, maybe the money could be better spent in other areas.

 “If history tells us anything, it tells us that municipalities don’t do these things as well as the for-profit sector,” he added. “Cities have to hire engineers and others for these projects, whereas companies like Verizon work on them day in, day out.”

Courting a ‘White Elephant’
Without knowledgeable staff on hand, it’s much more difficult for a municipality to determine if such a project would be profitable enough to retire the bonds or “if taxpayers would have the white elephant of a little-used broadband project,” Testa said.

Market is Providing
Additionally, the Fiber to The Home Council recently reported that rural fiber build-outs are moving forward at a fast pace, primarily due to private market projects.

Eric Page, a partner in the Richmond, Virginia, office of LeClairRyan, a corporate consultant law firm, says municipalities should consider the burden on taxpayers for taking on broadband services the market is increasingly providing.

“I think the question here is just how important—how essential—broadband is,” Page said. “There’s a philosophical debate as well as a financial risk for taxpayers, so you have to look at [the proposed project] in the context of if they had universal broadband access, how beneficial would it be?”

Phil Britt ([email protected]) writes from South Holland, Illinois.